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Checklist of a Buyer interested in an Existing Business

Seller’s Reason for Selling – Why did he/she put the business on sale? The reason should be truthful and should not have anything to do with the integrity or profitability of the business

Sales Performance – Assess the sales trend of the business, this will help you determine the performance of the business once you take over

Financials and Tax Returns – Review all the provided financial documents for the past three to five years. This will help you have a grasp of how the business’s profitability. As a buyer, you may need to sign a confidentiality agreement before obtaining these data.
Legal Agreements – Examine all the documents to be passed on by the seller, including employee agreements, least agreements, supplier contract, and insurance policies. There must also be a legal contract signed by both the seller and the buyer.  Both parties must agree with the terms.

Existing liabilities – Be mindful if the business has any outstanding debts. These might be an indicator of the stability of the business. Check if there are also refunds and warranties that you may still avail of.

Structure of the Business – Evaluate the current framework and set-up that are currently being applied in running the business. Determine if there’s any factor that’s hindering or delaying the process or causing difficulties.

Interest of the Buyer – What do you find appealing when it comes to a business? What is your passion? These questions might help you determine what business is right for you.

Employees – Get to know the staff, assess their relationships among each other and with the current owner, along with the existing contracts they signed. These factors may help you decide if you will retain them or replace them with new ones.

Tax Considerations – Know the specific tax obligations that will come with the business once you’ve acquired it. You must be knowledgeable about these to avoid inconveniences in the future.

Inventory – Talk to the seller about the existing inventory. Know if it will be included in the sale or will be kept by the current owner. You also have to be oriented about the processes they follow in managing the inventory.

Assets – The seller must provide a comprehensive list of the existing assets of the business. Check the condition and the corresponding value, since these will, most likely be included in the sale.

Zoning and permits – If the business is located in a specific area, for example in BC, check if the business is following the building code and other zoning regulations specific to the area. Make sure that the changes you want to apply will conform to the property’s zoning requirements and other regulations being observed in BC.

Make sure that the business has the necessary permits to keep it running and that these are up-to-date.
Business Reputation and Customers’ Feedback – Take a look at the publicly available information about the business. Are there any complaints filed against the business? Review the customer’s feedback on the products and services that are being offered by the business. Determine if you have to tweak the assortment to satisfy more potential customers.

To know more about buying and selling existing businesses, visit BC Business for Sale.

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